Following is the speech (translated from Chinese) by the Chief Secretary for Administration, Mr Matthew Cheung Kin-chung, in presenting the Government Minute in response to the Report of the Public Accounts Committee No. 68A in the Legislative Council today (April 11):

President,

Laid on the table today is the Government Minute (GM) responding to Report No. 68A of the Public Accounts Committee (PAC).

First of all, I welcome the submission of Report No. 68A by the Chairman of PAC to the Legislative Council on January 17, which offered comments on two chapters in the Director of Audit’s Report, namely, "Government’s support and monitoring of charities" and "Provision of district council funds for community involvement projects".

I am also grateful for the time and effort that the Chairman and Members of PAC devoted to investigating these subjects. The Government accepts PAC's various recommendations and sets out in detail the specific responses of the relevant bureaux and departments (B/Ds) in the GM. Now, I would like to briefly address the major concerns of PAC.

Government's support and monitoring of charities

On "Government's support and monitoring of charities", the Law Reform Commission (LRC) published its Report on the regulation of charitable organisations and charitable fund-raising activities in which some of the recommendations had far-reaching implications on the operation and development of charities in Hong Kong and the issues involved were very complicated.

While the recommendations of LRC touch upon the duties and responsibilities of a number of B/Ds, the Home Affairs Bureau (HAB) has been assigned to co-ordinate inputs from relevant B/Ds and is actively following up the co-ordination with a view to formulating a response to LRC's recommendations for the Government's overall consideration as soon as possible.

Meanwhile, HAB is co-ordinating with relevant departments to explore feasible administrative measures by making reference to the recommendations in the LRC Report, the Audit Report and the PAC Report, with a view to enhancing the transparency of charitable fund-raising activities and safeguarding the rights and interests of donors. These measures include, among others, making public the relevant financial information of charitable fund-raising activities granted with a licence or a permit; enhancing the "1823" hotline and the charitable fund-raising activities webpage on the "GovHK" portal; reviewing and enhancing the "Reference Guide on Best Practices for Charitable Fund-raising Activities" issued by the Social Welfare Department; stepping up promotion efforts and encouraging charities to follow such practices.

On the other hand, the Inland Revenue Department (IRD) has enhanced the periodic review of tax-exempt charities. With effect from January 2018, IRD will conduct the first review of all newly recognised tax-exempt charities two years after its tax-exempt status is recognised. For existing tax-exempt charities, the review cycle has been shortened from at least once every four years to once every three years. Currently, under section 88 of the Inland Revenue Ordinance, IRD's role is to consider whether the organisation is within the legal meaning of charity. IRD is seeking legal advice from the Department of Justice to explore if there is room to enhance its work within the existing legislative framework.

Besides, Lands Department (LandsD) generally accepts the comments and recommendations made by PAC on the monitoring of charities under lease.

Regarding PAC's recommendation to review and improve the protocol on Private Treaty Grants (Protocol) issued in 2014, LandsD issued a refined Protocol in the first quarter of 2018. LandsD has also completed Phase 1 of the stock-taking exercise for those Private Treaty Grants (PTGs) granted at nil, nominal or concessionary premium during the period from January 1, 2016 to December 31, 2017, and would continue to undertake the stock-taking exercise in phases and share the findings with relevant B/Ds, subject to priority of other tasks in hand and resources available, with a view to reminding the relevant B/Ds of their monitoring roles in respect of the relevant PTGs, taking into account their responsibilities under the Protocol.

Besides, LandsD promulgated a new set of internal guidelines in May 2017, under which LandsD will recommend that the concerned sponsoring B/Ds impose "submission of audited accounts" and "no distribution of profits" requirements when processing new PTGs or lease modification/ lease extension of existing PTGs. LandsD will request justifications if the recommendation is not accepted. When applications for lease modification or lease renewal are received for the 11 PTGs named in the Audit report, excluding the three virtually unrestricted leases, LandsD will process the applications by applying the said instruction.

As to PAC's recommendations on the regulation of Chinese temples, HAB and the Chinese Temples Committee (CTC) have actively followed them up and taken measures to enhance the transparency of the operation of its temples. In respect of the issue of renewing the expired delegation agreements of two delegated temples, CTC re-entered into an agreement with one of the delegated organisations in December 2017. The CTC Secretariat has also repeatedly met with the other delegated organisation. The two parties are now finalising the details with a view to re-entering into an agreement as soon as possible.

Provision of district council funds for community involvement projects

With regard to the "Provision of district council funds for community involvement projects", section 68 of the District Councils Ordinance (Cap. 547) provides that a District Council (DC) may make standing orders for regulating its procedures and those of its committees. The Home Affairs Department (HAD) has provided a model text of standing orders to 18 DCs for reference. Such arrangement has struck a balance between maintaining consistency in DCs' making of standing orders while allowing flexibility to adopt procedures that can cater for the actual situation of different districts.

On the implementation of community involvement (CI) projects, HAD has compiled the "Manual on the Use of District Council Funds" (HAD Manual) to provide further guidance to DCs. The HAD Manual covers different areas such as the funding coverage, vetting criteria, payment arrangements, monitoring mechanism, etc. On the basis of the HAD Manual, each DC has devised its own detailed guidelines for the implementation of CI projects and the district guidelines must comply with the principles set out in the HAD Manual.

In response to the recommendations in the Audit Report, HAD has further enhanced the arrangements on the implementation of CI projects. For example, providing DCs with guidelines to facilitate their review of the list of designated non-governmental organisations; producing analyses of CI projects for DCs to facilitate their management of DC funds; reminding DC secretariats that a proper evaluation system should be put in place to monitor the effectiveness of CI projects; and reminding DC secretariats that DC members, co-opted members or district staff who do not have an interest in the organisation or the project under evaluation should conduct visits or attend the activities on a random basis.

Turning to declaration of interests, HAD has all along formulated provisions on avoidance of conflict of interests under the model text of standing orders on the basis of the guidelines for a two-tier reporting system devised in collaboration with the Independent Commission Against Corruption (ICAC). All DC members declared interests according to the standing orders and the declarations have been uploaded to DC websites for public viewing. The first-tier declaration requires DC members to report their personal interests within one month from the commencement of their term. The second-tier declaration requires that any DC member who has pecuniary or other interests in any matter handled by the DC concerned, or has links with the benefitted party or potential benefitted party, including matters on tender, quotation and DC funds, must, as soon as practicable after being aware of it, declare such to the DC concerned prior to the discussion of the relevant matter.

In addition, the HAD Manual provides further guidance on the second-tier declaration, requiring that DC members shall make declarations on any conflict of interests which may be actual, potential or perceived. They should also refrain from having business dealings with any party associated with projects financed by DC funds.

The two-tier declaration system is well-established. DC members are familiar with this system and have made declarations accordingly. In consideration of PAC's and Audit's recommendations, HAD has further enhanced the relevant arrangements and systems, including the following:

(a) HAD has, in consultation with the ICAC, formulated guidelines on the "other declarable interests" under the first-tier declaration to facilitate DC members in making the first-tier declaration more comprehensively and accurately. For example, under these guidelines, DC and Committee members’ holding of positions in the implementation parties of CI projects are regarded as “other declarable interests” and should be declared;

(b) Regarding the second-tier declaration, HAD has requested DC Secretariats to remind, at every meeting or during circulation of papers, members to declare interests and the chairpersons to make rulings on the interests declared and to record such rulings in the minutes of meetings. Under the current practice, the minutes of meetings are uploaded to DC websites for public inspection;

(c) HAD has worked with DC Secretariats to devise good practice in handling declaration of interests and making rulings at meetings by DC, committee and working group Chairpersons. The good practice has been distributed to DCs for reference.

President, I would like to thank the Chairman and all Members of PAC again for their efforts and guidance. Relevant departments will strictly follow their responses in the GM and implement the improvement measures as soon as possible to ensure the proper use of public funds and compliance with the original policy objectives.